Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence


Memorandum submitted by the Royal Ulster Constabulary

  Since the partition of Ireland, the existence of revenue differentials has sustained a lucrative smuggling industry in the Border areas, the flow of traffic and the type of commodity involved being dependent on the revenue/supply differentials which apply at any given time. Those so minded are able to readily exploit these differentials due to the 300 mile plus land boundary. EU subsidies/grants for example, in relation to beef, grain and butter, have also influenced this trade. More recently, the restrictions placed upon the Northern Ireland beef industry due to BSE, including the "Over 30 Month Scheme" ["OTMS"], have similarly encouraged smuggling. Historically therefore, smuggling has been endemic throughout the 76 year existence of the land boundary, despite the best efforts of HM Customs and Excise, the RUC and other relevant agencies, such as DANI. Since 1993 and the introduction of the "Single European Market", the absence of any physical restrictions or checks on the border has simply provided an easier environment for smugglers to maximise their experience and guile in exploiting revenue differentials.

  In the spring of 1998, the RUC became aware of the widespread importation into Northern Ireland of hydrocarbon fuels on which no revenue duty has been paid via the land boundary with the Republic of Ireland. This fuel is then retailed at "makeshift" sites and, increasingly, at otherwise legitimate service stations.

  The latter are operated either by independent retailers or franchisees of the major oil companies. It is estimated that the illicit trade in fuel oils accounts for 40 per cent plus of sales in Northern Ireland. Again, this illicit trade is driven by the differentials in fuel revenues which exist between the UK and the Republic of Ireland. Detailed submissions on these aspects will, no doubt, be made to the Committee by HM Customs and Excise [HM C&E].

  The Committee will be aware that the primary responsibility for the enforcement of the law in this area rests with HM C&E. The RUC, however, in recognition of the fact that HM C&E has limited resources within Northern Ireland, plus the obvious potential for "terrorist-funding", has been fully supportive of HM C&E in its operations to date. Additionally, uniformed police, exercising their powers under the Custom and Excise Management Act 1979, have on a number of occasions, independently intercepted and seized suspected illegal importations of fuel oil.

  The level of support which the RUC can provide, is not, however, without its limitations, due to the heavy demands placed upon the Force in conventional policing roles. Cognizance must also be taken of the fact that no other policing area within the UK has a land boundary, therefore the level of support which the RUC is called upon to give to HM C&E is without parallel in British policing. Clearly, with both Agencies having finite resources which can be directed at this particular problem, there is a need for an overall strategic plan, which maximises their operational utility and effectiveness.

  Following discussions between both agencies and representatives of the oil industry, including the Petrol Retailers Association, it was agreed that any initiative to counter the smuggling of fuel oils must be intelligence-led. This intelligence can be gleaned from a variety of sources, including operational RUC officers, particularly those within Border Sub-Divisions. Other intelligence is also available to HM C&E and within the oil and petrol retailing industries. Such intelligence can form the basis for HM C&E-led operations, supported when necessary, by the RUC. The RUC's "D" [Operations] Department co-ordinates such support via the Regional ACC's and local command, particularly in North and South Regions.

  The only area in which the RUC takes the predominant role is in those cases in which it is believed that the profits from fuel oil smuggling is used as a main source of funding for terrorist organisations. It is widely acknowledged that any widespread smuggling in the Border counties or distribution of smuggled goods in Nationalist areas is most unlikely to take place without some benefit deriving to republican terrorist groupings. However, as the trade in illicit fuel affects large parts of the Province, intelligence indicates that it is clearly outside the capacity of any one group to control such an undertaking. Rather, it is believed that they derive their benefit from licensing or franchising operations conducted by individuals (who may or may not have terrorist affiliations). In the few instances where intelligence of this nature has become available, it has been developed by the RUC and has resulted in action being taken by the Headquarters Serious Crime Squad—C1[2].

  It must be candidly stated that the smuggling of whatever commodity across the land boundary is extremely difficult to police. The history of this type of activity and 30 years of terrorism have taught us that much. The mischief therefore needs to be addressed by other means, including effective and punitive sanctions for those caught involved in this illicit trade. Further, the high differential which exists in duty levels between the UK and the Republic of Ireland may require review to be perhaps placed on a more comparable footing. This of course may not happen, because perhaps in the overall scheme of things, the losses to the Exchequer as a result of this illicit trade in Northern Ireland are much less than the level of duty derived from fuel oils on a UK basis. HMG nonetheless urgently needs to consider and address this issue, just as it is doing in respect of the illicit importation of alcohol into the UK from the Continent. It must also take cognizance of the damage being inflicted upon the petrol retailing industry in Northern Ireland. This particular mischief will not be remedied by an enforcement strategy alone.

  HMG must also recognise that offences such as the evasion of hydrocarbon fuel duties have the potential to release into the NI economy very substantial sums of money that of necessity need to be "laundered", as straight bank deposits could evoke disclosure requirements.

  Past investigation has shown that such money tends to be "invested" in other criminal enterprises such as contraband/counterfeit goods, drugs, etc or alternatively in legitimate businesses which are run for further criminal gain and as outlets for other illegally acquired goods.

22 January 1999

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